Synergetic effects of water and climate policy on energy-water nexus in China: A computable general equilibrium analysis

Abstract

A unified policy framework for energy and water would be beneficial considering the high interdependence of the two resources in China. In this paper, a recursive dynamic computable general equilibrium model is established to examine the existence of synergetic effects within water fee policy and energy related climate policy, i.e. carbon tax, and provide insights for Chinese integrative policy-making. The results show that water fee can contribute to industrial water conservation, whereas its effect is limited under current water fee level. The adoption of a carbon tax in addition to it might further improve its water saving benefits. Furthermore, water fee can also promote the enhancement of China's emission reduction goal, and a higher carbon tax and water fee rate can achieve greater emission reduction effects. At this point, the synergetic spillover effects that water conservation benefits will be achieved simultaneously via the transition of industry into a more low-carbon form is critical for elaborating an effective strategy of environmental policy. Besides, our results suggest that giving priority to renewable power is regarded as the silver bullet to address the water and emission constraints on energy system, as it can optimize the water conservation benefits of emission reduction.